Alteration of Memorandum of Association referred as change in foundation document of a company through passing a special resolution by shareholders. It also needs the relevant authorization from regulatory authorities, alteration of the records under corporations and business, and reflects a change in the company’s goals, its name, or its capital.
Memorandum of Association (MOA)
A crucial legal document that establishes a company's foundational framework. It outlines the company's name, purpose, registered office, objectives, member liability, and share capital. The MOA defines the company's external operational scope and relationship with shareholders.
Meaning of Alteration of Memorandum of Association
The process of modifying MOA’s clauses to adapt to a company's changing requirements is called alteration of MOA. Alterations can involve changes in name, objectives, registered office, liability, or capital structure. This modification must comply with the Companies Act, 2013, and requires:
- Shareholder approvals
- Regulatory authority consent
- Filing with the Registrar of Companies (RoC)
Clauses of the MOA that Can Be Altered
Name Clause
- A special resolution passed at a general meeting allows a company to change its name.
- The Central Governments (Registrar of Companies) approval is necessary unless the change includes adding or removing the word Private when converting between company types.
- The modification is only effective after the Registrar issues a new Certificate of Incorporation.
Registered Office Clause
- A company may shift its registered office:
- Within the same city or state: Requires passing a board resolution and filing the necessary forms with the Registrar.
- From one state to another: Requires approval from the Central Government and submission of a special resolution.
- The alteration is effective upon issuance of a fresh Certificate of Incorporation by the Registrar.
Object Clause
- To add, remove, or modify the objectives, a special resolution must be passed.
- If the company has unutilized public funds raised through a prospectus, the change must also meet these conditions:
- Publish details of the alteration in newspapers (one in English and one in the local language).
- Provide dissenting shareholders with an exit opportunity as per SEBI regulations.
- The alteration takes effect upon registration by the Registrar of Companies.
Liability Clause
- Changes to the liability clause are rare and typically involve converting an unlimited liability company to one with limited liability.
- This requires a special resolution, Central Government approval, and updating the MOA with the Registrar.
Capital Clause
- A company can alter its authorised share capital either by enhancing or reducing by passing an ordinary resolution and filing form SH-7 with the registrar.
- Variations in the capital do not need the approval of the Central Government, although they must share in the section 61 of the Companies Act.
Subscriber Clause
- To update information about initial subscribers (rare in practice).
Steps for Alteration of Memorandum of Association
- Board Meeting: Invite the BoD for a meeting to consider the proposed changes in its structure. The proxy may be tendered by the company only if all directors have been served with a notice of the proposed changes at least seven days before the meeting.
- Drafting a Special Resolution: If the BoD does so, then prepare a special resolution that records the changes and the reasons thereof. Such a resolution can only be passed after a general meeting through voting in which at least seventy-five percent of the shareholders supporting the resolution.
- Notice of General Meeting: Writing of notice for EGM or AGM should be made to all shareholders not less than 21 days before such a meeting. The notice should hence contain information about the proposed amendments
- Conducting the General Meeting: Bring the special resolution at the meeting of the members of the organisation. A vote is taken, and in the event one attains the required majority then move to the next step
- Filing with Registrar of Companies (RoC): File Form MGT-14 along with a copy of the passed special resolution and altered MoA with the RoC within 30 days of passing the resolution. This filing includes paying any applicable fees
- Registrar’s Approval: The RoC will review the submitted documents. Upon satisfaction, it will issue a certificate of registration for the alteration, which serves as proof that all requirements have been met
- Effectiveness of Alteration: The alteration takes effect from the date of issuance of this certificate by the RoC. The updated MoA must be maintained at the company's registered office and made available for inspection by stakeholders
- Updating Company Records: Ensure that all statutory documents reflect the amended MoA and notify relevant stakeholders about these changes
Conclusion
The Companies Act of 2013 governs a structured legal process for amending the memorandum of association. To ensure transparency and legal validity this modification needs to be approved by the board and shareholders comply with regulations and be formally registered.
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